Banking question

kenz · 24-09-2006, 06:14 PM

Hello people
I am young so I dont really know much about certain things. Like banks

: My pay goes into my account and I withdraw it thats all I need to know. But I've got my tax done the other day and want to put it into a new account called a Netbank Saver Fast Start (Commonwealth Bank) which is for people under 25 you only need $1000 to gain interest on it instead of the usual $5000 and the interest rate is 5.85%pa. "Interest is calculated daily on the entire balance. Interest is added to your account on the first business day of the following month." So basically what does that mean in simple english and is it worth while? I basically know nothing about this sorta thing and I know alot of you will think this is a stupid question but if i dont ask how am I going to learn. Dumb questions need answers too

:

Thankyou
Luke

uranium_death · 24-09-2006, 06:30 PM

It means that interest earned is calculated daily, but placed in your account monthly.
To my understanding, this is better than average as your balance will accumulate faster (although in the short term, there isn't all that much difference).
The interest rate isn't bad either.

But I would also look at the fees (if there are any).
If there fees are higher than the interest earned on $1000, then it won't be worth while.

Read the fine print just to make sure you are fully aware.

Ultimately, putting money in savings accounts etc. will not reap you high rewards, but the risk of losing money is almost non-existent. In comparison, shares potentially reap greater rewards but the risk is far greater if you don't know what you are doing.

So in your case if you aren't too familiar with finances, teh savings account will provide you with a safe way of saving money with a slow but steady accumulation over time.

pertuan · 24-09-2006, 06:32 PM

I find HSBC is better value. Commonwealth Bank has always been a rip off to me. Anyway, you might want to look at other banks apart from CBA. Some have lower fees, some have no fees at all.

kenz · 24-09-2006, 06:48 PM

Thanks for the quick responce guys. There are no fees attached to this account and it is only through Netbank so I cant withdraw it unless I transfer it into my usual account. So im gathering its just have over $1000 in there and forget about it and it very slowly grows.

05MkIIFutura · 24-09-2006, 07:05 PM

Kenz

Check out Suncorp Metway, they have the 'Everyday Options' account which has the following features:

> You can have up to three high interest sub-accounts which can be used for any purpose. Return on these is 5.90% calculated daily.
> You are entitled to unlimited fee free transactions (at anyones ATM if you are outside QLD, thats usually $1.50 each at any other bank!!)
> All for $5 / month, with no restrictions on how much you have to have as a balance, deposit etc etc each month

Have a look anyway

http://suncorp.com.au/suncorp/bankin...y/options.html

poolkeeper · 24-09-2006, 08:02 PM

ING is great, high interest etc...
Had an account since I was like 13 or something

MO · 24-09-2006, 08:55 PM

My advice if you've got any spare dollars...forget savings...put it into your super...because when you retire there will not be an old age pension.

lcdownes · 24-09-2006, 09:51 PM

when I was 5 commenwealth bank came to school and signed us all up. They charged no fees until i stopped being a full time student, at which point i moved onto credit unions. Banks are blood sucking vampires who will take anything they can get away with. I am now with HSBC for my everyday banking. No fees free atm transactions. That pays high interest around 6% on balances above 2000, and for my savings savings i put it into Elders Rural Bank (its a credit union though). They pay even hiugher interest and have a range of short term deposits which is good for me to stop me going out on a blinder and getting into the cash.

uranium_death · 24-09-2006, 10:34 PM

Commonwealth Bank charge 10 bucks for a cheque to be issued.
5 bucks a month for account management.
They charge you for almost every transcation you make at an Automatic Teller Machine.

Next year the Commonwealth Bank have also decided to charge people a "walking fee", where every step you take inside the bank will cost you 20 cents.
The "oxygen fee" is currently being generated. The CBA is looking at purchasing oxygen from the Australian government, so when people breathe inside the bank, that will also incur a charge for 50 cents for every breath.

It must be tough times for the Commonwealth Bank, having recorded their new record profit of $3,928,000,000 (3.9 billion dollars!) for the 2005/2006 financial year.

Only 4 billion dollars...what can you do with such a measly amount?

**ebxr8240** · 25-09-2006, 10:45 AM

They are sure doing it tough...Lol..
Yes adding to supper or buy shares in bank ???
Its along term thing, I'm into real estate but first you need to build up some kind of funds, assets ... Time goes fast trust me..Compounding interest where you get interest on interest as quick as possible is best....
Supper you may not be thinking of at present, but when you take the money out there's little tax on it...Though that "can" change.....

Aeron · 25-09-2006, 10:51 AM

I say you should blow all your cash on a car.

But yeh, stay away from St.George, people. I dont like them.

4.9 EF Futura · 25-09-2006, 11:24 AM

Super is by far more tax effective than anything you will undertake on your own (not a debateable matter - a super fund exists purely to recveive concessional tax status - 15%.... that's what makes a super fund a super fund).

Quote:

5.85%pa. "Interest is calculated daily on the entire balance. Interest is added to your account on the first business day of the following month."

OK, this is pretty much a standard term deposit.

Interested calculated daily. Let's say there's 260 business days in a year (5 x 52).... remembering the bank may use a different calc, but doesnt make a big difference. The applicable daily interest rate will be 5.85/260 = 0.0225% daily.

Now the monthly crediting works in the Bank's favour, but dont stress - its standard market practice. And we're talking about SFA.

So, they calculate all of your interest payments (all of those 0.0225% payments) and credit them to your account once per month. If, for example, they credited daily - then tomorrow's 0.0225% would include yesterday's 0.0225% in the balance.

So, ideally - the more frequent the crediting occurs - the quicker the balance will grow. But monthly is fairly standard.

My personal opinion (im not authorised in any way/shape/form to offer financial advice) is that the Commbank product is quite competetive and i informally recommended it to a friend of mine (it was the best out of the options she had presented). So are the ING direct "type" online savers.

Quote:

It must be tough times for the Commonwealth Bank, having recorded their new record profit of $3,928,000,000 (3.9 billion dollars!) for the 2005/2006 financial year.

Only 4 billion dollars...what can you do with such a measly amount?

Considering an entity like CBA is systemic to the operation of the country's financial system - its in our best interest that they generate big earnings to support the risks they are taking. If you dont understand why then you may wish to read up on the capital adequacy calculations for a banking entity.

What's the ROE on that profit? You realise they're carrying over $250 billion of assets on the balance sheet. $$$$ values alone are useless, unless you're having a whinge about the banks. You need to look at these things relatively. What if they were an American bank with assets in the trillions?? A $4bil NPAT would be a disaster.

If fees are your key complaint then take a look at the average interest margin on a loan product. Margin contraction in the industry is seeing this fall below 1% in a lot of cases. The banks slit each others throats on pricing of loans, so they make up the money in fees. Ironically - we've no one to blame but ourselves on that one!!!